1963: the Studebaker pension collapse
The federal pension insurer, the PBGC, describes what happened at Studebaker. In 1963 the company closed its largest plant and ended its pension plan. About 3,600 older, retired workers received their full benefits. Roughly 4,000 active employees, many with decades of service, received only about 15 percent of the benefits they had expected, and thousands of workers under age 40 lost their benefits entirely.
Counts differ by source. A separate PBGC history page says more than 8,500 auto workers lost some or all of their promised benefits. This page uses the PBGC figures and names them. The Department of Labor gives different numbers, which we did not use here.
1974: ERISA and the PBGC
Senator Jacob Javits introduced pension reform legislation in 1967, partly in response to cases like Studebaker's. After years of hearings, President Ford signed the Employee Retirement Income Security Act (ERISA) on September 2, 1974. It created the PBGC. If a company plan ends without enough money, the PBGC steps in and pays the benefits workers earned, up to legal limits. For 2026 the limit for a single-employer plan paid as a straight-life annuity to someone starting at age 65 is $7,789.77 a month. Most people in those plans receive less than the limit.
Studebaker did not create the 401(k). ERISA is about protecting traditional pensions. The 401(k) comes from a different law and solves a different problem.
1978 and 1981: the tax rule that became the 401(k)
The ICI explains the timeline. A tax code provision allowing cash or deferred arrangements was added in 1978 as Section 401(k). The IRS did not describe the rules for these plans until November 10, 1981, when it proposed regulations. In the years after, large employers typically offered 401(k) plans as an add-on to existing pensions.
Ted Benna, a Pennsylvania benefits consultant, is often called the father of the 401(k). By his own account,* he noticed paragraph (k) in Section 401 and saw that it could let workers put part of their pay into a retirement account before tax. Press profiles, such as ABC News and the Workforce interview, repeat this account. We have not verified the details of his story against a primary document, so treat the story itself as his version of events. The dates above come from the ICI.
Pension versus account: a worked example
This is arithmetic, not a forecast. Suppose a pension pays $2,000 a month for life. Suppose a 401(k) holds $400,000 and you take out $2,000 a month, with no investment gains or losses and no taxes. $400,000 divided by $2,000 is 200 months, which is 16 years and 8 months. After that the account is empty, while the pension keeps paying.
Real accounts earn or lose money, and withdrawals are taxed, so the true number differs. The point is who carries the risk. In a pension, the plan owes you a stream of payments. In a 401(k), you own a balance, and how long it lasts depends on contributions, returns, fees and how much you take out. Our page on how long $1 million lasts in retirement works through that with inflation.
Common questions
Did Studebaker create the 401(k)? No. Studebaker's collapse led to the 1974 pension law. The 401(k) came from a 1978 tax provision and the 1981 IRS rules.
Are the 70% and 14% how many people have a 401(k)? No. They are the share of private industry workers with access to a defined contribution plan or a defined benefit plan in March 2025. Access is not the same as signing up, and a worker can have access to both.
Is a 401(k) protected the way a pension is? The PBGC insures traditional pension plans, not 401(k) accounts. A 401(k) balance rises and falls with what it holds.
Is this financial advice? No. It explains public history and published statistics. It does not tell you what to do with your own account.
Asterisk note
*Benna's account of how he found and used paragraph (k) comes from his own telling, as repeated in press profiles. It is not verified against a primary document here. Educational only, not financial advice.
Related tool
Fees quietly shape what a 401(k) is worth. The Expense Ratio Calculator shows what a 1% fee does to a balance over 30 years.
Sources checked October 8, 2026
PBGC: PBGC, Pensions, and Studebaker
PBGC: History of the PBGC
PBGC: Maximum benefit tables, 2026 row
BLS: Employee Benefits in the United States, March 2025
ICI: Quarterly Retirement Market Data, Q2 2026
ICI: 25 years of 401(k) plans (1978 provision, November 10, 1981 IRS proposal)
Ted Benna's own history: benna401k.com*
ABC News: Ted Benna profile*
Limits
Educational explanation, not tax, legal or investment advice. Historical claims and examples are labelled. Nothing here promises a result for any person.